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The Market and Pennsylvania

If the stock market were to pick a President, it would no doubt vote its shares for Republican Sen. John McCain.

Yet the financial markets are so far counting on a likely Democratic win. But the question is which candidate.

Stanford Financial Group Chief Political Strategist Greg Valliere says the markets would like Sen. Hilllary Clinton, D-N.Y. better than Sen. Barack Obama, D-Ill. "He's far more negative for the market than she is. I think she would have more of a Wall Street influence in her Administration as Bill (Clinton) did," he said. Obama, for instance, would be more aggressive raising taxes.

Today, voters in Pennsylvania cast ballots in their presidential primary which will be key in determining the outcome of the Democratic race. Clinton is widely expected to win, an outcome that would drag on battling between the two Democratic candidates

"I think she's going to win (Pennsylvania) by eight or 10 points...That said, I think people in the markets are beginning to focus on him (Obama)," said Valliere. If Obama wins Pennsylvania? "It could ratchet up the anxiety in the markets over his policies, which are well to the left of her's," he said.

Dan Clifton, head of policy research at Strategas Partners, doesn't see that much difference between Clinton and Obama on the issues, so the race between them is really more about personality.

To the markets, McCain is seen as more positive than either. "McCain's got the same position on pharmaceuticals, utilities as the Democrats, but there are others where the market will start to say this could be good -- maybe the traditional energy sector and potentially managed care," he said.

If Clinton has a strong showing in Pennsylvania with a 10 point or greater win, "The theory is this race is going to go on a lot longer. That would be a boost to John McCain," he said.

Clifton said if McCain were to win the November election, he would most likely have a Democratic Congress, and the ensuing grid lock could be viewed as a positive by markets. Obama, on the other hand, could enact a great amount of change in his first two years if he were to win, along with a Democratic Congress.

"If it gets to the macro market issues, John McCain is seen as a positive. He's not going to raise your taxes. The Democrats are the complete reverse. Raising taxes is going to lower multiples on the market and restricting trade is going to make less places for business to make profits," he said.

Both Clifton and Valliere say the economy is the biggest issue to voters, but Clifton says if the race is ultimately between McCain and Obama. Iraq could become a big factor. He said they have opposite views on the success of the surge. "They start yelling at each other because they both think they're so right," he said. Valliere said Iraq could be an issue that could turn some conservative Democrats away from Obama for fear he would be overly aggressive with a withdrawal plan.

"By default, McCain's numbers have gotten better as the Democrats beat up on each other. He has a lot of headwinds," said Valliere. But the question remains whether he can move into the lead. "You've got an economy that's going to have some really bad numbers for months to come," Valliere said.

Clifton said the two Democrats stack up differently against McCain in polling data. "When you poll them against McCain. Hillary is keeping the Democratic base with her, and McCain is taking the independents away from her, and if you poll McCain against Obama, those blue collar Democrats move to McCain," he said. Independents then stay with Obama.

Clifton said McCain is hurt by the poor approval ratings for President Bush. He also sees a strategic problem for McCain in that he doesn't have enough money to pull a slam dunk against the Democrats while they fight each other, but at the same time that sparring is helping the GOP candidate.

Questions? Comments? marketinsider@cnbc.com

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC's Senior Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.